Copyright 2001 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
June 21, 2001, Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 4932 words
COMMITTEE:
HOUSE ENERGY AND COMMERCE
SUBCOMMITTEE: ENERGY AND AIR QUALITY
HEADLINE: NATIONAL ENERGY POLICY
TESTIMONY-BY: DAVID M. NEMTZOW, PRESIDENT,
AFFILIATION: ALLIANCE TO SAVE ENERGY
BODY: JUNE 22, 2001
TESTIMONY OF
DAVID M. NEMTZOW, PRESIDENT ALLIANCE TO SAVE ENERGY
BEFORE THE
HOUSE COMMITTEE ON ENERGY AND COMMERCE HEARING ON ENERGY EFFICIENCY AND NATIONAL
ENERGY POLICY
Mr. Chairman and Members of the Committee, thank you for
the opportunity to testify before you today about the role of energy efficiency
in serving as the foundation of national energy policy.
My name is David
Nemtzow. I am President of the Alliance to Save Energy, a bi-partisan,
non-profit coalition of business, government, environmental, and consumer
leaders dedicated to improving the efficiency with which our economy uses
energy. Senators Charles Percy and Hubert Humphrey founded the Alliance in 1977;
it is currently chaired by Senators Jeff Bingaman and James Jeffords as well as
Representative Ed Markey.
Over seventy companies and organizations
currently belong to the Alliance to Save Energy. If it pleases the Chairman I
would like to include for the record a complete list of the Alliance's Board of
Directors and Associate members, which includes many of the nation's leading
energy efficiency firms, electric and gas utilities, and other companies
providing cost savings and pollution reduction to the marketplace. The Alliance
has a long history of researching and evaluating federal energy efficiency
efforts. We also have a long history of supporting and participating in efforts
to promote energy efficiency that rely not on mandatory federal regulations, but
on partnerships between government and business and between the federal and
State governments. Federal energy efficiency programs at the Department of
Energy (DOE), the Environmental Protection Agency (EPA), and other agencies are
largely voluntary programs that further the national goals of environmental
protection, as well as broad-based economic growth, national security and
economic competitiveness.
1. INTRODUCTION
Energy-Efficiency: A
Bipartisan Tradition
From the days of our first national nightmare of
gas lines and soaring fuel prices, energy efficiency has had champions in
Congress from both sides of the aisle. Sen. Charles Percy, who founded the
Alliance to Save Energy in 1977, recognized the need to promote energy
efficiency to address a glaring hole in our nation's economic security. He knew
that a partnership between business, government, environmentalists, and consumer
advocates would not only result in benefits for each sector, it would help avoid
the need for coercive regulation when our problems reach crisis level.
Support of action by the federal government to promote energy efficiency
has also been historically bipartisan. Though the establishment of the
Department of Energy and energy efficiency programs is most often associated
with the Carter Administration, key advancements in federal efforts were made
under the Reagan and Bush Administrations. While funding was cut severely from
Carter-era levels, President Ronald Reagan signed the National Appliance
Efficiency and Conservation Act (NAECA) the law requiring DOE to set energy
efficiency standards for appliances and other equipment. That program has led to
tens of billions of dollars in savings for the American people and significant
carbon emissions reductions. The first Bush Administration, in the context of
its support for the Rio Treaty, began to significantly expand funding for DOE
energy efficiency and renewable energy efforts and created the Green Lights and
Energy Star programs at EPA. In addition, former President Bush signed the
Energy Policy Act of 1992, which expanded the scope and magnitude of energy
efficiency efforts.
The House and Senate caucuses devoted to promoting
renewable energy and energy efficiency continue that tradition of
bipartisanship. Currently, the House Renewable Energy Caucus features well over
I 00 members from both parties. Such support from all parts of the political
spectrum is what has made clean energy a driving force in the American economy.
Today's Testimony
I am here today to testify on how investment
in energy-efficient technologies can help address our energy needs, ease strain
on our energy supply, reduce air emissions harmful to the environment, and save
taxpayers money. At no time since the late 1970s has energy been such a
prominent topic of public debate. The release of President Bush's energy plan,
and now the consideration of comprehensive legislation by Congress, have served
as platforms for a great national conversation regarding what we want out nation
to look like as the 21 " Century proceeds.
Mr. Chairman, all energy
sources are not created equal. Some cost more than others. Some pollute more
than others. Some require the approval of local communities to be transported
from one place to another, whereas others do not. Some generate profits that
accrue only to a few, while others disperse benefits widely among the public.
By virtue of its ability to ease strain on energy supplies thus reducing
energy prices, increase reliability of supply, not only not exacerbate - but
reduce - pollution, increase our national economic security, and disperse
benefits widely over the population, energy efficiency is a superior choice for
investment by the federal government.
Let me also say that while energy
efficiency should be the cornerstone of national energy policy, the nation will
also need clean, new energy supplies. Our energy problems are severe enough that
we will need major contributions from both the supply and the demand side of the
meter.
Americans Choose Energy Efficiency
Americans want a true,
aggressive effort to achieve energy efficiency, Mr. Chairman. The American
public is concerned about our nation's energy use and believes that energy
efficiency and conservation are key components to addressing our energy needs. A
Gallup poll published in mid May found that 85% of the U.S. public showed strong
support for mandating more energy efficient appliances, buildings and cars. And
support is only rising. An ABC News/ Washington Post poll released on June 5th
found that of the 1004 adults surveyed, ninety percent support action by the
federal government to encourage more energy conservation by business and
industries. Ninety percent also support action by the federal government to
encourage more energy conservation by consumers. An overwhelming 89 percent of
those polled said they would "require car manufacturers to improve the
fuel-efficiency of vehicles sold in this country."
I hope the recent
debate over energy policy has resolved at least one point. When we talk about
energy efficiency, we are not talking about personal sacrifice, or any other
reduction in economic well-being or quality of life. Energy efficiency means
providing the services that our modem economy and lifestyles demand - lighting,
heating, cooling, transportation, IT, and much more - but doing so with less
energy input. Energy efficiency means relying on technologies - many of which
are familiar, while others are still innovative or even still in the laboratory
that can provide the same or superior services, productivity and comfort while
using less energy input. And lessening energy input means reducing the numerous
pollutants and environmental stresses that result from our currently wasteful
energy practices.
11. ENERGY EFFICIENCY AND THE ECONOMY
Energy
efficiency makes money and puts people to work. The economic gains from energy
efficiency come in two forms. The greatest benefit comes from displaced costs --
money that households and businesses can spend elsewhere because they no longer
have to spend it on energy. That spending includes additional investment and
hiring additional workers. Direct economic benefits come from growth in
industries that generate energy-efficient products and services. Companies that
sell insulation or efficient windows domestically and/or for export employ
Americans in high-skill service and manufacturing jobs. Secondary economic
benefits come from businesses and consumers re- spending these newfound energy
savings in sectors of the economy which are more labor-intensive than energy
supply.
Energy efficiency Must Be Measured as an Energy Source
Our energy system operates against the backdrop of a U.S. economy that
has become significantly more energy-efficient over the past quarter- century.
But we often fail to realize the actual contribution of energy efficiency to our
GDP and national well being. Mr. Chairman, it isn't easy to compare the
contribution of energy efficiency to the environment and the economy with more
traditional energy sources such as oil and coal. It requires the observer to
regard saved or unused energy as created energy in the same way that oil comes
out of the well and coal comes out of the mine. In addition, I think that any
.economist would tell you that energy efficiency measures have increased the
supply of energy and thus helped to lower the price. Energy not used is just as
salable and usable when conserved as when produced. Upgrades in energy
efficiency made to home appliances, industrial equipment, building systems, or
car and truck fleets serve as an energy source that increases our overall supply
of electricity, coal, oil, and natural gas.
Energy-Efficiency, our
Number 2 Energy Source in 1999
Alliance research shows that, for 1999,
the most recent year for which we have complete data, energy efficiency was the
second leading source of energy for U.S. consumption, and if we consider only
domestic energy sources, it's number one. Mr. Chairman, it would have been
number-one if we declined to count oil imports, now more than half of this
nation's oil consumption. Our analysis of 1999 energy consumption shows that
energy efficiency provided the nation with 27 quadrillion Btus (quads),
approximately 22 percent of U.S. energy consumption. While energy efficiency
trails our mammoth oil consumption (38 quads), it significantly outstrips the
contribution of natural gas (22 quads), coal (22.0 quads), nuclear (8 quads) and
hydro (4 quads).
Mr. Chairman, the contribution of energy efficiency to
our nation's overall supply is now so great that we cannot regard it as an
esoteric externality anymore. We must promote and support it in the same way we
do the coal belt and the oil patch, which enjoy a variety of tax breaks and
subsidies based on their use of fuel.
These figures show energy
efficiency for what it is - an unparalleled driver of environmentally sound
economic growth.
Mr. Chairman these economic snapshots of efficiency
show an energy industry that spans the economy and the populace. But it is not
an energy industry that looks like what we have known in the past. However, all
the functions of traditional energy industries are represented. But with
energy-efficiency, the miners are businesses trying to cut their costs. The
roughnecks are homeowners trying to keep their families warmer in the winter.
The geologists are mechanical engineers working to get more out of less. Energy
efficiency is highly dispersed throughout the economy. And because of its
diffuse nature, energy efficiency doesn't carry the political clout of the
coal-mining regions, or of the oil and gas- producing regions. There is no
"energy efficiency patch."
By the same token there is not a defined
energy efficiency industry. Whirlpool makes highly efficient appliances but they
sell washing machines and refrigerators, not energy efficiency. Honeywell sells
controls that regulate building systems that can save a company millions of
dollars a year, not energy efficiency. Owens-Coming sells fiberglass insulation
which can make a house warmer, more comfortable, and more economical to live in,
but they sell insulation, not energy-efficiency.
So when we have to make
tough choices about what we do with federal dollars and initiative, we must
think about energy efficiency as what it is - an energy source that is essential
for the economic health of our nation - and one that thus far has paid off like
a gusher for the American people. And yes, Mr. Chairman, that energy is produced
cleanly, displacing both Conventional air pollutants as well as ones believed by
many to be causing a warming of the Earth's climate. It enhances our national
security, as this year we again went to war to protect our interests in Mideast
oil fields. Energy efficiency cuts costs for businesses and consumers, and it
increases our international competitiveness -- all the things we have
traditionally talked about.
The tough choices on energy must be made
with a clear eye on the contribution to the environment, the economy, national
security, and international competitiveness delivered in the past and promised
for the future by energy-efficiency.
111. ACCURATELY ASSESSING OUR
ENERGY NEEDS
Whether in relation to volatility in oil supplies and
gasoline prices, electricity, or price spikes in home heating fuels, we must
consider the range of options available to deal with our national energy
problems. That requires a close look at demand side as well as supply side
measures. Prudent decisions require the comparison of costs and an assessment of
what the benefits are and where they accrue.
How Many New Power Plants
Will We Need? Let's look at the electricity situation. Earlier this year, Vice
President Cheney cited the Energy Information Administration (EIA) projection
that we would need at least 1300 additional power plants to satisfy our new
electricity needs through 2020. His comments left the impression that this was a
fait accompli, and that Americans would have to face that fact as surely as the
Sun setting in the west.
When we look more closely at the facts, Mr.
Chairman, building 1300 new plants is only one item on a menu of alternatives we
can employ to meet our electricity needs. But, in fact, aggressive investments
in energy efficiency could free up enough electricity supply to eliminate the
need for most of those 1300 plants. And it would do it in a way that would be
much better for the environment, dispersing benefits much more broadly across
the economy.
Let's examine the facts behind the 1300-powerplant
argument. DOE's forecast is based on the Energy Information Administration's
Annual Energy Outlook, which uses a macroeconomic model called the National
Energy Modeling System (NEMS). But NEMS, like all models, can miss the mark. For
example, in 1999 NEMS predicted no increases in natural gas prices. The
1300-poweiplant forecast would drop dramatically if it used these inputs:
-230 of the 1300 power plants are for replacing current units, a task
much easier than building completely new units. So the net new demand for power
is actually 1070 plants.
-3 00 power plants' worth of capacity, already
in the pipeline, will come on line by the end of 2002. That leaves the need at
770.
-Appliance efficiency standards for clothes washers, water heaters,
and air conditioners, passed by the Clinton administration in January, and
agreed to by the Bush administration, will reduce demand by 127 power plants in
2020. That cuts the need to 643.
-If the Bush administration supported
the air conditioner standard at the SEER 13 level approved by Clinton, instead
of the reduced SEER 12 level they announced in April, another 43 plants would be
saved, reducing the need to 600. Pursuing strong standards for commercial air
conditioning would save another 50 plants, cutting the need to 550.
-Programs to reduce energy use in new buildings, such as building energy
codes, tax credits, and public benefit programs, would avoid 170 power plants.
That means reducing new homes' demand by one I kW per home, and new commercial
building demand by I watt per square foot. Modem building codes alone can easily
achieve those kinds of savings; doing so takes the need down to 380 power
plants.
-Programs to improve existing buildings, by targeting
residential air conditioners, commercial lighting, and commercial cooling, can
trim demand projections by another2lOpowerplants. Thatleavesthetallyat170.
Since our electricity industry is producing 300 plants over the next two
years, it is reasonable to assume that another 170 can be brought on line over
the following eighteen. Many if not all of those could be renewable-energy
plants, producing little or no pollution. Realizing the energy efficiency gains,
especially the 380 power plants from new and existing buildings, will take a
concerted effort, involving increased R&D funding, aggressive support for
building codes, new federal tax credits, and public benefits funding from
electricity sales to support state-based efficiency programs.
Before we
arrive at what the solutions to our energy problems should be, Mr. Chairman, we
need to do this kind of analysis. What are our options? What can be done quickly
and cleanly. What is the relative cost of the options?
IV.
ENERGY-EFFICIENCY POLICY MEASURES
The Alliance to Save Energy believes
that the following five items should be contained in any national energy policy
legislation:
1.)National System Benefits Trust Fund
2.)Targeted
Tax Credits for Highly Efficient Products and Technologies
3.)Increased
Fuel Economy in the Transportation Sector
4.)Increased Investment in
Energy Efficiency Research and Development
5.)Expand the Appliance
Standards Program
National System Benefits Trust Fund
Many parts
of the nation are facing on unprecedented challenges in preventing electricity
shortages, reducing air pollution, and responding to high consumer energy bills.
Energy efficiency provides the cleanest, fastest, and cheapest way to respond to
these needs. A federal public benefits fund is the most effective national means
to support these needed investments.
One of the reasons that
demand-growth overtook electricity supply in California is the fall- off in
energy efficiency spending by utilities in beginning in 1995. The onset of
competition in California changed the traditional relationships between state
regulators, utilities, and the need to provide public benefits, such as energy
efficiency and renewable energy investments and low-income programs. These
programs had been highly successful in California up until that time. The Fund
Corporation issued a report in 2000 that quantified the benefits of the state's
utility energy efficiency programs, finding that between 1980 and 1995, utility
efficiency investments generated roughly $
1000 in returns for
every $
1 spent. Fund also found that the overall economic
benefit to the state from these programs was responsible for 3 percent of the
California gross state product in 1995. Finally the study concluded that energy
efficiency programs had avoided a 40 percent increase in stationary source air
pollution during that period. Some have characterized energy efficiency in
California as a failure and a cause of current gap between demand and supply.
That is highly inaccurate. In fact, it was wildly successful. They just didn't
grab enough of it.
The Alliance supports the creation of a systems
benefit trust fund, to augment state spending on just the kind of measures that
were so successful in California. The fund would come from a non- bypassable
charge on electricity, which would then go to match state expenditures on energy
efficiency, low income programs, renewable energy, and state- based research and
development.
States are spending about $
1.7 billion
this year on public benefits programs, including efficiency, renewables,
low-income programs, R&D, and related public goods. A federal match at this
level would raise another $
1.7 billion annually. The
residential share of this would amount to about $
6 per year per
family-about 50 cents a month.
The benefits would be enormous; they are
projected to include: 92,000 Megawatts of electric capacity savings by 2020
(equivalent to about 300 powerplants); 1.24 trillion kWh saved over 20 years,
cutting consumer energy bills by $ 1 00 billion; and 150,000 tons of nitrogen
oxides emissions avoided.
The public benefits fund is off-budget,
providing an efficient way to support the states in their efforts to respond to
their mandates for reliability, clean air, and affordable energy. 50 cents a
month is a very small price to pay for keeping the lights on, the air clean, and
energy bills down.
Tax Credits for Energy Efficient Products and
Technologies
Members of both parties in both the House and Senate have
introduced legislation to promote tax credits to spur energy- efficient
technologies and products. The Alliance believes that tax credits provide strong
mechanisms to both attack market obstacles to the adoption of efficient products
and provide an incentive for the rapid adoption of the next generation
technologies that are not yet produced on a mass basis.
The Alliance
supports establishing tax incentives in the following areas:
-
Residential tax credits for the construction of highly- efficient new single
family homes and substantial upgrades of existing homes.
-A production
tax credit to manufacturers of extra-high efficiency refrigerators and clothes
washers.
-A tax deduction for investments in new multi-family and other
commercial buildings.
-An investment tax credit for purchases of highly
efficient hybrid gas-electric and fuel cell vehicles.
-A tax credit
and/or accelerated depreciation schedule are provided for investment in combined
heat and power systems
The intensive of analysis of specific proposals
is currently taking place in the Ways and Means Committee. I urge this Committee
to work with that Committee to promote these important energy-related tax
incentives.
Increased Fuel Economy
The fuel economy of today's
cars and light trucks are at their lowest point in twenty years. But while fuel
economy has been, oil imports and oil prices have continued to rise. U.S. oil
imports have more than doubled over the past 15 years and prices of petroleum
imports hit $
110 billion, or one quarter of the U.S. trade
deficit in 2000. Cars and light trucks consume 40 percent of the oil used in the
U.S. every day and emit 20 percent of U.S. carbon pollution. With gasoline
prices rising across the country America has found itself in a crisis of its own
making. We must raise the fuel economy of the vehicles on American roads.
Fuel economy standards are popular everywhere but Detroit, thus making
them a bone of contention in Congress. In fact, eighty- nine percent of the
adults polled this month by ABC News/Washington Post support action by the
federal government to require car manufacturers to improve vehicle fuel
efficiency in the U.S.
There are many ways to increase fuel economy
including closing what is known as the light-truck loophole which would make the
SUV parked in the supermarket meet the same 27.5 mile per gallon
CAFE
standard as the car beside it. In 1999, this loophole cost consumers
$
27 billion at the pump; closing it would save at least I
million barrels of oil a day. Another option is increasing the fuel economy of
cars and light trucks to meet a 40- mile per gallon standard that could save
1,500 gallons of gas per second. Or, a consumption cap could be applied to
encourage manufactures to continue to increase their fleet fuel efficiency
without the standard CAFE formulation. Offering tax credits for high efficiency
vehicles can contribute to the transformation of America's gluttonous vehicle
market.
The American public is tired of paying too much at the pump
because they don't have the choices at the auto dealership to get the car they
want with the high-efficiency technology that is available. And it is available.
A report by the Union of Concerned Scientists released Wednesday shows that US
automakers could produce a fleet of cars and trucks that get an average of 40
miles per gallon by 2012, and 55 mpg by 2020 with no decrease in safety or
performance. This increased fuel efficiency would save consumers billions of
dollars each year, cut 273 million tons of annual greenhouse gas emissions by
2010 and 888 million tons by 2020, and create tens of thousands of new jobs in
the auto industry.
Increased Research, Development, and Deployment at
DOE and EPA
In 1996, Mr. Chairman, the General Accounting Office did a
study of a variety of success stories detailing energy and cost savings to the
Nation which DOE had published in 1994. Unfortunately, the purpose of the study
appeared to be political, and it attempted to discredit energy efficiency
programs by attacking DOE's methodology for preparing the success stories. But
rather than achieving this goal, it ended up validating billions in energy
savings for a few key technologies which far outstrip out entire national
investment in energy efficiency over the past 20 years.
Mr. Chairman,
the accumulated success of these programs at saving money for American consumers
and taxpayers is remarkable. The GAO study validated DOE's assertion that just
five technologies' developed or assisted by the DOE buildings program resulted
in $
28 billion in energy savings over the past 20 years for an
approximate $
8 billion in investment as of 1994. DOE has
updated results for those programs which credits them with returning
$
50.9 billion to the U.S. economy through 1999. Add gains from
the low-income Weatherization Assistance Program, state energy programs, and
building and appliance standards work, and returns total $
89.6
billion. Add FEMP gains and it moves to $
101 billion. Add the
hundreds of other technologies to come out of the business, industrial, and
transportation programs and the additional, accrued energy savings of the past 5
years and you get a portrait of an overwhelmingly cost-effective effort which
has contributed significantly and directly to the quality of life of Americans.
Mr. Chairman, I have yet to know of a federal program that has returned
more than $ 1 00 billion to the economy for the relatively small investment of
$
12.0 billion through 1999. By the same token, the EPA Energy
Star and Green Lights programs, as well as other EPA climate programs, have
already returned more than $
40 billion in energy savings to the
economy from less than $
750 million in federal investment
through 1999. In addition, these federal partnerships with businesses, state and
local governments, school districts, non-profits, and other organizations have
yielded reductions of more than 300 million metric tons of carbon equivalent
pollution.
Expand the Federal Appliance Standards Program
One of
the true top performers in energy efficiency has been the appliance standards
program at the Department of Energy. Every refrigerator that is sold today is
well more than twice as efficient as the comparable model from 25 years ago. The
same is true for a variety of other products. These improvements have been very
successful and cost- effective. A key route to increasing the energy efficiency
of the economy is to expand the appliance standards program to include
additional products such as commercial refrigerators, torchieres, ice makers,
traffic lights, and exit signs, as well as reducing the stand-by power
requirement of electronic appliances. The savings in 2020 are estimated to reach
$
20 billion per year from expanding this highly successful
program.
In addition, Mr. Chairman, the Alliance strongly supports the
rule promulgated by the Department of Energy earlier this year to raise energy
standards for residential central air conditioners and heat pumps to a Seasonal
Energy Efficiency Rating (SEER) of 13. Soon after taking office, the
Administration elected to rollback the rule and to reduce the proposed increase
to SEER 12. This was done despite the fact that due to worsening electricity
problems in Western, and perhaps other, states and increases in electricity
prices, the SEER 13 standard is even more cost- effective and justified than it
had been earlier. Furthermore, all major air conditioner manufacturers already
sell models that meet the 13 standard and that two of them strongly support the
original rule. Additionally, as you know, earlier this week, a lawsuit was
initiated by the Natural Resources Defense Council, the Consumer Federation of
America, three state Attorneys General and others to reverse that decision. I
ask this Committee to urge the Administration to take into account the new facts
governing the nation's electric reliability and prices and to re-affirm the SEER
13 standard.
VI. CONCLUSION
A comprehensive national energy
policy must seize the opportunity to exploit energy efficiency in each of these
critical areas. Public opinion is overwhelming that a true effort to increase
efficiency is desired by the nation. Many times, Mr. Chairman, I have sat in
hearings and listened to Members say that, despite our best efforts at energy
efficiency, we still need to focus on production. I do not now, nor have I ever
said that energy- efficiency can do all that needs to be done to provide for the
energy needs of this country. I will say, however, that - as a nation - we have
not even begun to give our best effort to make our economy more efficient.
A balanced, comprehensive energy policy must take aggressive steps to
save energy wherever it is cost-effective and feasible. Energy-efficiency may be
our second largest energy source, but it should be our first energy priority.
Thank you for the opportunity to testify before your Committees today.
I'm happy to address any questions you might have.
LOAD-DATE: June 26, 2001